Image source: Shopify.
Thirteen years ago, a computer programmer wanted to start his own business -- an online store for snowboarding equipment. In the process, he would go on to tackle a much bigger opportunity with the creation of Shopify (SHOP 0.09%), a now $10 billion company that equips entrepreneurs with the tools they need to manage their small and medium-size businesses.
In this special interview with company co-founder and CEO Tobi Lutke, we discover the special blend of long-term vision and talent that has made Shopify an essential tool for hundreds of thousands of businesses, while delivering triple-digit returns for shareholders in just two short years.
Andy Cross: I'll just kick off a little background quickly, to make sure you all know the story. Tom and David Gardner founded The Motley Fool over 20 years ago, and through a variety of different primarily investment newsletter services, Shopify is a recommendation of ours to thousands of members that we have. Specifically where we have Shopify where Bill and I work with Tom is in what we call Tom's Everlasting Portfolio. It's a real money portfolio of public equities. They also match what Tom owns personally. It's part of our Motley Fool One service, which is our premiere service for our members. Shopify is in a couple different services, but what specifically we're excited about talking to you today about is, because we own it in Tom's Everlasting Portfolio. That's a little background. Bill and I work with Tom on that, and across lots of other ventures. All of us have known each other for 15 years.
Bill Mann: Yeah, we've worked together for a long time. We're delighted to be able to spend this time with you.
Cross: That's a little background. Bill and I will get started, and if Tom can join us, that's great, because like Bill said, we know you have a hard stop in about 30 minutes. I think you have a few questions Maggie sent over, which is great. So we'll start talking through some of those, that's great, and then we'll take it from there, Tobi, if that works.
Tobi Lütke: Yeah, great. Take it in any direction you want, it's completely up to you. We can go through the list you sent over, or we can take it any direction, don't worry about that.
Cross: Great. Tom just got here, that's great, so Tom can jump right in on the call. Tom, hop on in. He's going to put his phones on, so before we'll start ...
Tom Gardner: My apologies.
Cross: Can you hear, Tom?
Mann: Tom will talk later.
Gardner: My apologies.
Lutke: Hey, Tom! This is Tobi speaking. I'm here with Katie. Great to meet you!
Gardner: Great to meet you all as well. Let me ask you, my opening question is not even part of our interview. Tobi, are you typically on time or not on time in life?
Lutke: [laughs] As a German living in Canada, making software for Americans, I think the compromise is I'm usually a minute late.
Gardner: [laughs] That's so good.
Mann: Exactly so.
Gardner: It's a real pleasure to meet in audio, obviously. We're very interested and big fans of what you've created, and excited to learn a little bit more for not just our members but for everyone who's out there following The Fool. I'm going to let Andy and Bill start the interview, and I'll just jump in.
Cross: Great. I'll just kick it off, Tobi, I'll go through some of the questions we sent over. Some may sound familiar. If not, we'll go from there. But I really want to start with, a lot of what we love about Shopify and a lot of the businesses that we invest in is companies that have wonderful cultures. I know you've done a lot to build and create a culture around Shopify. But one thing that you do talk about is having this healthy uncomfortableness in change. Personally, when was the last time that you were uncomfortable with Shopify, and what has changed about that, and how is Shopify stronger for that?
Lutke: I've met every version of Shopify ever that's ever existed, and I'm glad to say, I've always liked the newer version better than the previous version. Culture is one of the wonderful things that's very difficult to manage, but there's actually something you can do and really try to always make your concept better. It's interesting, because this sounds like nothing, but it's actually quite a statement, because what most people are trying to do, most of the small companies that get to any kind of size do so partly because they ended up with a good culture, they value the things that actually make a difference in the business, they dislike the kind of things that are very disruptive to the business.
The problem is, at that point, their focus becomes holding onto the values of the culture they have. And that actually ends up breaking really hard. A company such as Shopify and frankly, I'm sure you guys, you're going through a lot of different stages, each requiring different things from the team, from the business, different values, different kinds of things. So just being very conscientious of that, creating environments in which good culture can thrive without trying to control it. And then, frankly, looking for certain kinds of individuals that don't conform to some kind of pre-existing ideas, but people who can bring something new to the table, and then allowing them the chance to be their authentic self, rather than everyone pretending that they're exactly the same sort of corporate person, allowing them to be themselves. And getting them all into an office, or at least within proximity, and sending them roughly in the right direction with the vision and seeing what comes out of. I believe, that's the way I figured out how to build a company, in these kind of times where everything changes a lot.
So one of the things that we've been trying to do is very much not try to inoculate the insides of the company from the crazy changes that exist on the outside. All of us are on boats in very stormy waters in the industry today, because there's a million different micro trends that are all hitting us in the form of tidal waves at the same time. So I think what lots of companies do is pretend they aren't in these hot waters, like everything is where it was yesterday, and you have to build these very stable internal cultures that value predictability and so on. And we've said from the beginning, no, what we value is not predictability and all these kinds of things. What we value is how quickly we adjust to the new realities.
So thriving on change is a core part of the culture, probably the one which is the toughest to appreciate for the people joining. But that allows us to say, "Hey, you're watching, let's say, WWDC from Apple, and Apple announces Apple Pay, and we have an inkling that this might come into the web browser at some point, so let's go to Cupertino quickly, figure it out, and then build the system." So adjusting quicker to the reality, is something that's very important. This is something that I try, just for myself, to do this all the time. I take these studying weeks where I just go away for a week of the quarter and immerse myself in some completely new technology. I write my own machine learning models or whatever, because that's the kind of thing you have to adjust to right now. And because this way, I can come back, I just spent like a week of my life completely different from any other week around it, starting as a beginner and hopefully having made some headway into the topic, and I can come back from that with some stories from the campaign, and potentially that makes the company better.
Gardner: One of the things you said, Tobi, was that it can be particularly difficult to adapt or embrace that love for change culture, not trying to create a steady boat but to embrace the reality. You said it could be particularly difficult for newer people that are joining Shopify. Can you explain why you see things that way? We agree, but I would love to hear why you think that's the case, or why that's the case for Shopify.
Lutke: First things first, in a company that doubles every year, that means every single job gets twice as hard every year. So you can either become twice as good at what you're doing just to be in exactly the position you were at last year. That pretty much caps most people, even doing that is difficult enough if you can pull it off, it probably caps your ability for the changes in your life, your professional life, by itself. So you combine that with the company also growing around you, again, potentially, our product changing in what it does or how we talk about it, the requirements of the world, of the market we are in, changing. This is a lot to swallow. And at some point, you really are fighting human nature. Humans love stability. Nassim Taleb wrote a phenomenal book on this topic which I think is totally underappreciated, it's called Antifragile.
Gardner: We know it well.
Mann: We know it very well, yeah.
Lutke: There you go. It's the kind of book that a very small group of very successful people love, and no one else has heard of. It's really interesting in this particular way, right? And because you've seen it, you know what people call stability isn't actually that stable, even though it might appear that way. The reality is, what you have to do is, you have to deal with disruption all the time. So here's a couple of examples of things that we do at Shopify that are probably pretty surprising, because our goal is to create the kind of environment -- when we, as a challenge for the company, we want to be able to say, this is what we trained for.
So how do you train for this kind of thing? One time, this was fun -- we often have these kind of challenges, like today, everyone had to use their mouse with their left hand, or their non-dominant hand, this kind of interesting kind of exercise. But we take it to a much larger degree. For instance, we close our offices for a month. This was a couple years back, we had about 800 people, and we decided to deprogram everyone's thoughts for a while. And we did it for a month. We did it primarily, because we wanted to be able to work better with remote people, and we figured it's impossible to go in front of anyone and have a talk about how to learn how to work with other people being remote as part of your team. So let's all just be remote for a while. Some interesting effects came out of this, couple of our interns almost starved, because they didn't know how to get food without our kitchens. Which then led to our kitchen staff buying a food truck and driving around town and feeding everyone. Fun stories came out of this. It's very hard to think that you are in a company where after you figure it out everything stays the same, when suddenly you can't get into the office. You know?
Katie: My favorite story out of that week is the guy who never told his wife that they were working remotely. [laughs] He left every day as usual. She did find out.
Cross: Are they still together?
Gardner: That's great, Katie. A much smaller version of that for us was when there was a particularly long snow storm here in the D.C. area, and it had been four or five days, I started fielding a number of phone calls from people, saying, "Can we please open our office tomorrow, because my husband's office is closed tomorrow, and I need to get out of here right now for a day."
Mann: We can do it. So Tobi, it sounds to me that the type of person who's going to do well at Shopify, you obviously have talented employees, but it also sounds to me like, there are certain personality types that are ideal for you. When you're looking for employees, when you're interviewing, are there things that tip you off that you have someone who's going to be able to survive in that type of environment?
Lutke: Absolutely. We found, over time, obviously our unique approach to recruiting that's actually fairly different from the ordinary way of doing it. We go a lot through people's life story, because they're looking exactly for these kinds of situations. If you let people talk a little bit about their own story, you're going to find times when things went wrong, and then you can really dig into, how did you react? What did you do? What exactly was it that you did next moment, and after? The stuff that we're looking for involves a couple of things. One is, people who do well at Shopify are the kinds of people who are normally thinkers who find alternative paths to the similar goal, people who just say, like, yes, that's awkward to go about, and we can't use it, so let's find another one. That's highly correlated with success.
Another thing that's fundamentally, and this is probably due to our location, we don't tend to hire too many industry insider experts. We tend to hire a lot of high future potential people. Often straight out of university. Our interviewing process is more designed to tease that out, rather than how many years you have worked in the payments industry or something like that. This was partly an accident, because the labor markets in the cities where we grew Shopify in were simply not that deep, to have ready-made people who have exactly solved the kinds of challenges that Shopify wanted them to solve. But also, we didn't have the money to hire those people who would find them anyway, because, we just didn't.
So we had to rely significantly more on internal training. And this is, I think, part of the culture, which is paying dividends at this point, this sort of early focus on hiring high future potential, then having a substantial team at Shopify which is called talent acceleration team, which is made of a lot of Canada's business culture, frankly, and abroad, we are starting to move business cultures into these full-time positions because that's such a unique thing to have this kind of focus, as a company. And what we use this team for is really just helping people get to the point of their career where they're really valuable, much faster than they initially thought they could possibly do it. One thing we found out is, there isn't really a speed limit. From school, so many people come out with this idea that, I'm going to learn linear algebra this year or next year, and then I'll know linear algebra, and it's all about clock time. But really, in those two years, some people understand linear algebra based on talent in 10 hours. Some people need hundreds and hundreds.
Mann: Some of us will never get it.
Lutke: Right. We don't think there's a speed limit to personal growth. It's just, once the student is ready, the right teacher needs to appear, and so we're trying to tease out this particular situation early and quick. This is how, we have a high tenure, very low turnover staff of so many people who are perfectly homegrown into the roles that we need them for.
Gardner: I don't want to spend our entire time here on culture, although my personality type is, I love to learn, and I love to connect with people that are doing remarkable things. So for me, I can just keep asking questions about this. But I'll ask just one more on this, and then we can go more to the business. We use a methodology at The Motley Fool, which, we don't pigeon-hole people. It's as much a quiz that you can take as that you would tell us what you think your results should be. So you can tell us who you think you are. But it breaks people out into the following personality traits: an idea generator or a dreamer, an execution operator, a processor, a systems builder, and a people person. And when we've worked with the dynamics of those traits, what we've generally found is, when we move fast, we have problems with the processors and systems people, because they're seeing flaws --
Mann: They're terrified of failure, relatively.
Gardner: Yes. And in some cases, you really want them, you want that risk management in place to make sure that you thought through everything. And in other cases, you need to move quickly. And in entrepreneurial environments, the systems thinkers can suffer. So how do they fare in Shopify's culture?
Lutke: I know the challenge you describe. I would say Shopify is definitely dominated by the builders and by the dreamers. You'll find, because again, we are maybe 2% to 3% into this thing, so this is still really, really early here. What we're doing, there's clearly some part of the company which really benefits from systems thinking. It often feels like my job and the job of a lot of management people is, you're in this room full of pendulums that go back and forth between two different choices, like, frankly, growth revenue is one of those but also should we rebuild something or not, how much do we invest in the infrastructure, into the features, how big should we make the conference, these kinds of things. Each of those pendulums, we have an opinion where we should be, and that's the green zone. But you can never make them stop there. They only swing one way or another one through it. So at some point, someone has to say, hold on to this pendulum, because it's overshooting its target, you have to make it go the other way. The people we need are the people who can go and say, we know where this pendulum needs to be for the next couple years, we're going to build a little bit of a scaffold here so that the thing stays put where it ought to be, rather than, here is the median, and telling the teams exactly what they need to hear so the pendulum goes in the right direction again.
This depends on the group. In some parts, in our customer support, the way we do it, we have to figure out where exactly we want this pendulum to be, and then we figure out how to build a scaffold to support it, to stick to that point. But we don't want that for our latest experiments. We really don't want that in a lot of places in the company. So you just have to be very strategic about it. The one thing, though, that all this comes back to is, once you figure out there's different types of thinkers, across any different axis, honestly, this goes as far as introversion vs. extroversion, or people who grew up rurally on a farm vs. people who grew up in the city, whatever you want both. You want more different people. The concept of company multiculturalism is really good, and frankly multiculturalism is one of the stated goals of the country of Canada, so we inherit an appreciation for multiculturalism just from our home country. I think this has been tremendously successful for us, making teams aware, making the business of individual skills, and then still getting them all in a room so they can have their own input on the project.
Gardner: Thank you for that. We'll shift to the business right now, and I'll go with this high-level question, and Andy will ask the next one. How would you describe what Shopify is today? And where is it going?
Lutke: If you want to hear a really good pitch about what Shopify is, you have to talk to Harley, by the way. I'm more like, if you want to have a philosophical discussion that takes about two hours, I'm your guy.
Mann: [laughs] And yet you only gave us 30 minutes.
Lutke: [laughs] I think Shopify is ... where to go with that? I can tell you what I really care about. And Shopify really does the things that I really care about, and so maybe that's another way of describing it. I really, really care about making entrepreneurship happen. How many public companies are focused on getting people to drink sugar water? Why is there no public company focused on making people entrepreneurs? Clearly, this is what everyone wants. You go to any university dorm room and ask what people want to be, like 20 years ago, they wanted to be in a rock band, now they want to be entrepreneurs, right? I think that the traditional retail, the thing that people have been doing in town squares 400 years ago is actually one of the best ways of changing your identity from someone who works for someone else to someone who creates their own fate.
And what I'm fighting against is that the internet is closing the door on this opportunity. The internet is significantly leveraging centralization. There's a lot of people in the investment community and other public companies who think there should be only one thing on the internet, and that's going to be it. I think it's really important that there's space for individuals to say, there's something I like and want to create for myself, to go and build something. And because I was one of those -- I started a snowboard store, and it was very hard, because I could use software that was maybe built for already-large businesses. And I had to build it myself, and that's what became Shopify the company. And I think that this is a massively important part of the economy, which is the concept of new business creation. When people talk about SMBs, those are the success stories of the things I'm talking about. You can't have SMBs in the world if you don't allow people to actually have a reasonable path into even building them. So I think there's a tremendous demand for simplification, for making this more possible for more people out there. And Shopify the company is dedicated to bending down the learning curve that it takes to build these kinds of businesses, and then making it available to more people.
Cross: I want to pivot on that and talk briefly about, you have Shopify Capital, which is, you're actually helping a lot of SMBs, small and medium size businesses, you're helping them get started, essentially, and using the Shopify platform. My question is, piggybacking on your obvious passion for the entrepreneur, do you someday see Shopify getting more into actually investing some of your capital into businesses, similar to maybe what other venture firms do, or what Y Combinator may do, to support entrepreneurs?
Lutke: We can think about it but not yet. It's not yet the right thing to do. Maybe one day. But the big issue is, there's significant benefit in Shopify's neutrality. If we start investing in some of our customers, specifically partners, we kind of become king makers on our own platform. It's good short-term thinking, but it might be bad long-term thinking.
Gardner: And in a funny way, when you do that will be the time that I think the platform is becoming closed.
Lutke: Exactly. I think so. There are lots and lots of things that we could do that would be short-term beneficial, given what we have. But I make every decision based on what puts Shopify in the best position 10 years from now. So this is why, investing, I'm worried about it. It's an easy thing to kick off. Obviously, we have the money in the bank. Clearly, some people are itching to do it, even internally, because frankly, easy to do it, right? But yeah, I don't think it will put us in a good position.
Cross: It's also interesting to think about the build vs. buy model. There's what Apple has done with basically building everything internally, for the most part. And then, there are other companies that go out and make smaller tech acquisitions to support the platform and bring in technology that, maybe, for whatever reason, they feel they don't have a specialty in-house. I know you don't make a lot of acquisitions. Any thoughts about buying technology or putting some of the cash to work in those realms as well?
Lutke: I think we are on the latter track. And you're right, we haven't been terribly acquisitive so far. Shopify doesn't want to do things it doesn't think we can do the best in the world at. I don't think we, as a hobby, can be a better bookkeeping software than Intuit can build as a primary objective of the company. Our customers will absolutely buy bookkeeping software from us, if we had it. But I don't think it would be long-term good for us, because it would be eroding our focus on exactly what it is that's very important to us. But sometimes, things go from one category into another. A good example of that is, at some point, mobile. In the beginning, when Shopify launched, there wasn't an iPhone. Then, eventually, there absolutely was an iPhone, and there were a lot of apps in the App Store that allowed you to customize a mobile experience and so on. But that became so clearly a feature that most of the customers needed most of the time, which is, that's our internal test, when something clears this line of -- do most of our customers need it most of the time as a feature -- then it becomes something we're going to integrate into the core. So this was absolutely forever ago, but when a company we were working with needed a mobile app, we decided this was something we were going to bring in-house, and we also shaped mobile-optimized themes and support for these kinds of things in the core platform. So you make these changes, and we can just use money and acquisitions to save time, and that's the way we feel about it.
Gardner: We've remained private our 23 years. We're a smaller company than you. And we're very bitter about that ... no. I'm wondering what the experience has been like for you to be a public company. I know this wasn't in the questions we submitted, so if there's anything you don't feel like talking about, that's fine. But what do you think about that experience? And, obviously, during a period of remarkable performance for your business and for the market's appreciation of your business?
Lutke: There's a lot of people who think differently about going public. A lot of people see it as a milestone. I always saw it as a tactic. I walked away from much better private market financing offers when we decided to go public. I could have put the financing together in a week or two. You know my numbers, right? People were willing to give us much higher valuation and so on. The thing that made me go public, by the way, I'm a big fan, it was amazing for Shopify, it was exactly the right thing, and there's all sorts of reasons for it, but the thing that told me to take the company public is, I talked at other places about this concept of a trust battery. Internally, we use it all the time between people like, hey, you join the company, you do good work, you build up your trust battery between you and everyone else, and based on that, if you charge that over time, you get more economy, and you eventually might have get leadership positions and these kinds of things. It's a very useful thing to have, the concept of trust and have a metaphor for it so people can talk about it
I'm reminded of a trust battery in the relationship between Shopify and investors. Clearly, every private market investor who invests into Shopify will say they're happy about that fact. So through our growth, we charge this trust battery. And the thing about batteries is, at some point, they are full. And no matter how much electricity you produce, the batteries are not going to end up being fuller. So I decided, I know where my growth is going to come from in the next couple of years, which I pretty regularly said on the road. But I guess most people say that, but most people aren't engineers.
I wanted to go take the company public, because I didn't have anyone's trust battery to charge anymore. I knew if we go public, we perform, we grow, some people are going to take chances on us, therefore these people, I was pretty sure, are going to have better careers, because they take chances on us, because again, I was pretty confident that growth is going to happen. And that gets you to the much more rarefied circle of trusted public companies, which I don't think we've fully arrived at yet, by the way. It's still a work-in-progress I'm talking about here. But my ambition is that Shopify is going to be one of those very few companies that is public but is trusted to the degree that it can act as, similar autonomy to what private companies can do, highly trusted private companies. That was my goal. And this is why I decided.
So I like the process a lot. It was a ton of work. We did two IPOs at the same time, between Canada and the United States. We did everything in about four and a half months. I think quiet periods are terrible. Like at some point, we rang that bell, and that was a pretty profound event. I'm sort of a little bit of a cynic, but that was pretty cool. I wouldn't classify it as one of the hardest things we've done. But it's definitely one of the things that had the most impact, because additionally -- I'm sorry to be so long-winded -- again, we are located in Canada. There are real cultural challenges in Canada. Canada is an incredible country to build a company like Shopify. It's full of unbelievably smart, super loyal, hard-working individuals. But they have a self-confidence issue. They have a big neighbor. Everyone in Canada thinks they're just a poor version of the United States. And building something in Canada, everyone is like, oh that's such a great Canadian success story! Like, man, this looks pretty global to me, honestly. It's hard to convince Canadians of the fact that they're actually working on a level playing field, competing on a level playing field with even Americans. Going public ended up being one of those, undeniably, this is the level playing field. This is the NBA of businesses. If you join it, you're doing really well playing in it. And I think, this has created a kind of internal self-confidence that has really improved the way the employees think about the company, just the way that everyone approaches the business. It was almost this hack for resolving a cultural issue, which is really funny. So those are my thoughts on the business going public.
Mann: It's also interesting, and we actually follow a number of tech companies that are based outside of Silicon Valley. There's really a conceit that everything great that's happening in tech is happening in Silicon Valley. Y Combinator, for example, said, "If it's not happening in Silicon Valley, it's not happening." You really view where you are, in Ottawa, as an advantage. Are there certain things that you think, culturally, is available to you there that is not available to Silicon Valley?
Lutke: Absolutely. Tenure, for one. If I hire someone, it's completely different. I can say, "I can take a role in your personal growth story, because I think we're going to still work together in five years, maybe in 10 years." In Silicon Valley, I have friends who have amazingly fast-growing enterprise software companies, and their average tenure in their R&D team is 18 months. And the reason is because someone in the same building is building a business that's trying to mine asteroids.
Mann: Which is pretty cool!
Lutke: Exactly. If you're building enterprise software, and everyone is pushing a different button in the elevator, and then mine asteroids, then it's really hard to have full attention. So that's one of the things. But I want to be clear, building a company in secondary cities is completely different from building a company in primary cities. I almost feel like there should be two entire sections for business books in book stores -- well, if you can find a bookstore, that is -- because all advice that looks at primary, is something that, you almost want to do the opposite.
And so, one of the problems why secondary city is not as successful, it's not because it's harder, it's because it's more confusing, because you're getting conflicting information all the time. You try something that works, and then you hear that's what everybody should be doing, because you're talking with someone who's doing it. So I think this is something we've been aware of from the beginning, and we've almost splintered everything we heard through the lens of, "Does this extend to where we are and what we know about our area?" So that helps.
Then, also, there are some much more obvious advantages. People don't have good memory, but during the dot-com bubble time, there were many employees working here. Every other big company had offices in Ottawa. Ottawa has like 100,000 people working in tech. There's significantly more than in Waterloo, in Kitchener, there were more than Toronto until recently. This is a tech city, it's just we all forgot. But the people didn't leave. They just started working for the government and sometimes just not working for a while, because they did well. It was essentially this sleeper cell of amazing technology talent. And we feel like we activated it. So suddenly everyone is like, "Holy! You guys are doing the thing that was so much fun 10 years ago! Let's do that again!" And they came from everywhere, and we just had a company filled to the brim with very talented people. In fact, funnily enough, often it's the kids that join. We are beneficial of the programmer echo effect, because kids where both of the parents are computer programmers are amazing.
Gardner: It's like kids whose parents are both college professors, like, that's going to be a very intellectually curious and intelligent person, yeah.
Lutke: Exactly. And then, of course, we're within the same time zones for Toronto and Montreal and Waterloo, all near, none of those cities is as deep as the Valley, and not as deep as maybe New York City would be. But you combine all those and you create geographic consensus that all the really smart people should really go to this one company, because that's the biggest game. And then you end up with an amazingly talented workforce.
Gardner: Yes. And let me say, I personally have just one question remaining, although I'm really thankful for the conversation we've had so far. One reflection on secondary city entrepreneurship, and I really like your description of it -- you said, every decision I make, I'm making in the context of how to optimize things 10 years forward, which is also consistent with any of our favorite founder-CEOs and entrepreneurs in the public market. Jim Sinegal at Costco, Jeff Bezos at Amazon, there's a man named Bill George who ran Medtronic for 10 years, and the first day when he joined, he wasn't the founder but he joined and told all the Wall Street analysts, "I have to talk to you by law, but I'm going to spend time with you if you're on board with trying to get the best results 10 years from now, which I know is very unusual for you." So he changed the dynamics, changed the game with those analysts, and it's a different thing and technology. You don't hear that very often in Silicon Valley, so it doesn't surprise me as much when I hear it from somebody who really loves entrepreneurship and is in a secondary city.
And that kind of feeds my last question, which is, Tobi, what's driving you? As an investor, I like to invest in people that I feel are likely to be doing this 10 years from now, since they're making decisions based upon that. And I invest as much to learn about the world and put my capital behind people who are going to teach me about the world as anything else. So one of the things I love about Shopify is, it looks like we could be on a long journey with you. Is that how you see things? What's motivating you, if that's the case?
Lutke: Again, I think you can probably sense this, I have a love-hate relationship with the technology industry. I find it incredibly immature. I'm not just talking about the Uber kind of stuff. It's just full of people faking and pretending to be people they are not. It's full of people who, when there's a road forward, if there's a right way to go and if there's an easy way, they choose the easy way. And people are just so hung up on the concept of, let's get money and then celebrate it. This is the goal. So I'm glad to be a little bit of an outsider.
In a way, I'm pretty old fashioned in this thing. I'm just building a 21st century version of something which I would have probably been trying to do if I would have been born 400 years ago, which is, I found out something about myself, luckily very early in life, which is this experience that I had when I realized at some point that there's an option to build my own business, and what a tool that I used to build this immature snowboard store. And then, along the way, I had this experience of my first sale. And I remember what day it was, I remember exactly what I was wearing, what I was eating. It was 2004, November in Ottawa at a coffee shop. I got an email that said, "Hey, this guy from Pennsylvania bought a snowboard from you." And that was the first time it happened. I fell in love with that experience. I fell in love with that, and felt that, hey, I can do more of that. I can't get back that exact feeling. I had lots and lots of sales afterwards that never felt like this. But I can help other people have that. I can help other people have this experience. And that's how I can use my advantages -- the fact that I know how to get computers to do anything, and the fact that, for whatever reason, which I never want to say about myself, I'm interesting enough that people want to work with me on the kinds of crazy things that I think of. And we did Shopify together.
So now, every 90 seconds, someone has their first sale. And so, that is ... it's such a beautiful story, in a way, because I do exactly the thing that I love doing. I help people do something that maybe otherwise they wouldn't have done. And it's not small things. Again, I'm not helping people find exactly the right book to read. Starting a business is an identity-changing experience. If you start a business, your children will refer to you as an entrepreneur. You are going to be potentially known for having started this business. It's as much of an identity-changing experience as you can probably go through in your adult life, because most people at this point are fairly set on religion on political affiliation. So helping with that is great.
Also, I really like technology. I like the thing, not the industry. I do think it's wrong in all sorts of ways. I think technology needs to work for people. People come first. It's like, one of the things I always say is, "You never wait on the machine. Machines wait on people." That's such a simple thing, but it's amazing how much software violates that very basic requirement. So making great software fit into our lives in a more human way is something that I'm interested in exploring.
And lastly, very personal, I describe myself as a permanent learner. The concept of personal growth is very important to me. And Shopify is an incredible gift that keeps on giving. There's something new to learn every day. There's new challenges all the time. In all these kinds of ways, it's almost like this perfect environment for myself to explore the intersection of technology, the user interfaces and the way people behave, helping them accomplish things that they didn't themselves understand that they could actually potentially do by themselves, and carving out a little space on the internet for something that I think is worth protecting, and I feel would go away if there wasn't somehow, someone who figures out a way to channel capitalism to provide value to people who might not be the world's best customers, if you think about it. Entrepreneurs have no time, they have minimal experience, they have no money, they have tons of questions, they are fearful, very fearful of failure. So I would not have won a businessman competition pitching what Shopify is. It sounds kind of insane to go after this particular group of people as the primary goal of your business. But we have now 12 years almost, and we've figured out how to build a business model around it.
Sorry, I'm going to talk about Shopify Plus, I'm very excited about Shopify Plus, because those are the graduates, the really successful people who have built these businesses and increasingly, everyone else is agreeing that the software we built forged in the fires of people who are trying to build businesses on their lunch breaks. But that actually led to a software that works even better than anything else, even for Nestle and Procter & Gamble, that's really gratifying. But the thing that makes it all work is, we chose a set of constraints and a target audience, and seeing it create something that they can use so they can be successful with this, which they then can use to grow and become these incredible hundred million dollar businesses that we all admire every day. I think the need for something like that to support all of this will always be there. In the future, we might be doing all of our purchasing with either AI or virtual reality or any number of ways, how different it is for each of our customers. That's all temporary. But someone still has to help them create these businesses. And someone has to then, after the orders happen and the money has been transferred, they need to help those people actually get those products where they need to be, and do all this really complicated but somewhat boring planning that every business needs. And we're very proud to do that.
Cross: Tobi, you touched there on the final question that I have, which is, how is AI, artificial intelligence, how do you think that impacts Shopify's business, generally, going forward, both for your customers but also for you to be able to provide all the services that you want to provide going forward?
Lutke: That's a super interesting field. A tremendous amount of good can be done in our space with machine learning and AI. We have it heavily deployed for things like, when you use Shopify, no one has to learn how to do architecture manually anymore, it's just like, we can tell you, essentially, we can just tell you something, if we're shipping it or not. I love that. That's such a simple example, but it means now, everyone who uses the platform has to learn one less thing on this journey. So I think it has huge potential to go further there. Another thing that's really important is always to give our merchants new superpowers. I think AI is one of the areas that is most fruitful for us. We're really lucky, because outside of Silicon Valley, it's really Toronto and Montreal, both cities there some of the bigger employers, which are definitely the locational centers for AI talent, and where there are a lot of the machine learning algorithms developed in the universities. So there's a lot of talent that's around with us right now. We are going to be very focused on further reducing the learning curve that people have to go through for building businesses, because every single time we reduce the learning curve, it makes more entrepreneurs. I tend to not talk about things like count and so on, and this is partly because it's so hard to size. You can do a top-down this with how many small businesses there are. But really, what's the worldwide market for people who want that size, that make more money than they cost? It's probably second to oxygen, right?
Mann: Oxygen is overrated, by the way.
Lutke: [laughs] So a lot of people want a side hustle, a lot of people want to build businesses. So it's really just a question of how difficult is it. We are committed to using any technology that exists to lower the learning curve. And this is how you're going to see us deploy all these kinds of things.
Gardner: Tobi, thanks so much for all this. I have one little joke, thought, to share that I've had for a while. It sounds like it's right in the sweet spot of what Shopify is developing. And then, a book recommendation for you, and then we'll say goodbye a few minutes before the top of the hour, so at least we got out before the second deadline. The joke I have is that at some point, it will become so easy that, essentially, starting a business, so much of it will be automated for you. When you talk about fraud detection, if we take that to the logical extreme, it's just that you decide to start a business, it tells you what business you're going into. It hires your first person, it purchases raw materials, it assembles the product, it sells it, sees if it works. So you're like, "Hey, I made $320 today! Unbelievable, let me see what I'm selling right now, let me see here, I have to click in."
Mann: Hold on, let me check ... [laughs] It says here ...
Lutke: There's always room on our product team.
Gardner: And then, the book recommendation, you may have already read this book, but if not, I think you'll really enjoy it. It's called Work Rules, it's by Laszlo Bock.
Lutke: Yeah.
Gardner: Yeah, I think you've already read it.
Katie: We have it on our shelf.
Lutke: It's actually right across from me right now. I have read it. It's a good book. But here's the interesting thing regarding this book. This is actually one of those things which may be is a little bit of a key to why Shopify works so well. Because I was fascinated with the book. I had this epiphany, which finally explained something to me, and one thing that our remoteness did -- again, we are in Ottawa, we only talk with people, we read Medium articles about how other people solve problems, we read books -- we finally realized that all this time, whenever we consume any kind of content, what we have done is compared our current average against everyone else's highlight reel. If you're talking to the people from Google about this book, they say, "That is our ambition; that's not our current reality." So it's an interesting experience that you can only have with some kind of remoteness, because otherwise you have too many people from these places join, you have the inside track, you know exactly what's actually going on and how much the executive who wrote it is just trying to convince his own company to go all-in on these various ideas of theirs. And then, all the while, we are looking at this and saying, "Yeah, this does make sense, and this makes sense," and we adopt this.
Again, we are thriving on change, so everyone, here's a new way of doing things, and we might actually have a better version adopted before everyone finished reading the book than the originating company might actually hope to accomplish. So it's an interesting, yet another kind of tiny thought that all these ideas conspire. I'm actually fairly bullish on secondary city companies at this point. I think the companies that realize they're secondary city and act accordingly actually have a really good shot at things. Because Silicon Valley is a fairly distracting place.
Gardner: Yes. The ultimate example, in parting, in our category, is Warren Buffett in Omaha, Nebraska, somebody who's going to get as far away from the information that everyone thinks is the reason that you win.
Mann: Paycom in Oklahoma City will tell you the exact same thing.
Gardner: Tobi, we feel like kindred spirits with you, and we would say that even if we weren't invested in you. We're thankful for all the work you're doing, and for the hour that you gave us. We look forward to meeting up at some point in Ottawa.
Lutke: Great.
Katie: Awesome, thanks.
Cross: Thanks Katie, thanks Tobi.
Mann: Thank you so much for your time.
Katie: Take care, guys, bye.
